SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
JULY 26, 1999
HOST MARRIOTT SERVICES CORPORATION
DELAWARE 1-14040 52-1938672
- ------------------------ ------------ ------------------------
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification Number)
6600 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20817
(301) 380-7000
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
None.
ITEM 5. OTHER EVENTS.
None.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
None.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBIT NO.
20 Press Release dated July 23, 1999 announcing second quarter
1999 earnings.
20.1 Press Release dated July 26, 1999 announcing proposed acquisition
of Host Marriott Services Corporation by Autogrill
ITEM 8. CHANGE IN FISCAL YEAR.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOST MARRIOTT SERVICES CORPORATION
JULY 26, 1999 /S/ BRIAN W. BETHERS
- ------------------ -------------------------------------------------
Date Brian W. Bethers
Senior Vice President and Chief Financial Officer
EXHIBIT 20
PAGE 1 OF 4
HOST MARRIOTT SERVICES REPORTS 12% RISE IN SECOND QUARTER EARNINGS PER SHARE
EBITDA UP 9%
BETHESDA, MD, JULY 23, 1999 -- Host Marriott Services [NYSE:HMS], one of the
world's leading food, beverage and retail concessionaires, today reported net
income of $6.6 million, or $0.19 per diluted share for the second quarter of
1999, compared to $6.2 million, or $0.17 per diluted share for the second
quarter of 1998. Revenues totaled $350.0 million for the second quarter of 1999,
up 8% from $322.6 million in the comparable 1998 period. Operating profit
increased 10% to $20.3 million and earnings before net interest expense, taxes,
depreciation, amortization and other non-cash items (EBITDA) grew 9% to $35.6
million over the prior year.
Second quarter comparisons are affected by Year 2000 costs. Excluding
these costs, diluted earnings per share increased by 16% in the second quarter
of 1999.
Revenues for the first two quarters of 1999 increased 10% to $658.9
million and operating profit increased 11% to $22.8 million compared to the
first two quarters of 1998. EBITDA grew 10% to $52.9 million for the first two
quarters of 1999 when compared to a year ago. Net income, before a cumulative
effect of a change in accounting, increased 9% to $2.5 million, or $0.07 per
diluted share for the first two quarters of 1999, compared to $2.3 million, or
$0.06 per diluted share for the first two quarters of 1998.
William W. McCarten, President and Chief Executive Officer, noted, "I
am pleased with our solid operating results in the second quarter despite slower
enplanement growth, tight labor markets and Year 2000 costs. Our managers are
doing an excellent job of controlling costs while providing quality service to
our customers, and our concession redevelopment projects are generating solid
revenue growth. I believe we will build on our first two quarters' performance
in our seasonally strong third quarter."
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<PAGE>
EXHIBIT 20
PAGE 2 OF 4
AIRPORTS
2ND QUARTER REVENUES: $263.6 MILLION, UP 9% FROM 1998
Comparable domestic airport concession revenue grew 8% and was driven
by strong growth in revenues per enplaned passenger of 7% and nominal growth in
passenger enplanements of approximately 1%. Operating profit in the airport
business line increased slightly to $26.9 million during the quarter. Airport
operating profit margins declined from 11.0% in the second quarter of 1998 to
10.2% in the second quarter of 1999, reflecting higher payroll costs due to
tight labor markets and an increase in depreciation related to recent high
levels of capital investments. Partially offsetting these increases was an
improved cost of sales margin resulting from pricing and cost management
initiatives.
TRAVEL PLAZAS
2ND QUARTER REVENUES: $80.1 MILLION, UP 6% FROM 1998
Travel plaza revenue growth was driven by increased traffic, the
introduction of new branded concepts and moderate increases in menu prices.
Solid operating cost management also drove an increase in operating profit of
36%, or $2.1 million compared to the second quarter of 1998. The travel plaza
operating profit margin increased to 9.9% for the second quarter of 1999
compared to 7.7% a year ago.
SHOPPING MALLS
2ND QUARTER REVENUES: $6.3 MILLION, UP 43% FROM 1998
Shopping mall revenue growth reflects the opening of a new mall food
court in the first quarter of 1999 and the openings of two new mall food courts
in late 1998. Revenues at comparable locations that have been open at least one
year increased by 2%. Operating losses for the shopping mall business line,
which improved slightly, reflect continued start-up inefficiencies of new mall
projects in a seasonally low customer traffic period. Comparable location
operating profit margin increased from a negative in 1998 to a positive 4.5% in
the second quarter of 1999.
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<PAGE>
EXHIBIT 20
PAGE 3 OF 4
* * * * * *
Host Marriott Services, with its worldwide headquarters in Bethesda, Maryland,
is the leading food, beverage and retail concessionaire at nearly 200 travel and
entertainment venues, with approximately 25,000 employees in seven countries
around the globe. Host Marriott Services is unique in its custom solutions
business approach that combines internationally known brands with regional
favorites in airports, travel plazas and shopping malls. Many of the company's
concessions are operated under license agreements with branded partners such as
Burger King, Starbucks Coffee, Pizza Hut, Chili's too, Cinnabon, "TCBY" Treats,
Sbarro, Cheers, California Pizza Kitchen ASAP, The Cheesecake Factory Bakery
Cafe, Tie Rack, Lands End and Bath and Body Works.
NOTES:
In fiscal year 1998, the company changed the calculation of EBITDA to exclude
interest income, which is more consistent with industry standards. The 1998
EBITDA has been restated to conform to the 1999 presentation.
The company's results of operations are significantly affected by the various
travel and shopping seasons. Customer traffic is generally the strongest in the
summer vacation months, particularly from Memorial Day through Labor Day, which
has historically produced seasonally strong third quarter earnings. Shopping
mall food court customer traffic is generally the busiest during the fall and
winter holiday season.
Enplanement statistics were obtained from the Air Transport Association whose
member airlines represent over 95% of all passenger traffic in the United
States.
This press release contains "forward-looking statements" within the meaning of
federal securities laws, including, but not limited to, statements concerning
the company's outlook for 1999. These forward-looking statements are subject to
numerous risks and uncertainties, including the effects of seasonality, airline
and tollroad industry fundamentals, general economic conditions (including the
current economic downturn in Asia), government regulation, the potential adverse
impact of union labor strikes and the Year 2000 issue on operations, competitive
forces within the food, beverage and retail concessions industries, and the
availability of cash flow to fund future capital expenditures. Forward-looking
statements are inherently uncertain, and investors must recognize that actual
results could differ materially from those expressed or implied by the
statements. A detailed discussion of these risks and uncertainties is contained
in the company's 1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
FOR MORE INFORMATION:
MEDIA INQUIRIES: INVESTOR RELATIONS:
Wendy Watkins: (301) 380-7903 Sharon Whiting: (301) 380-7215
WEBSITE / TELEPHONE:
http://www.hmscorp.com
1-888-380-HOST
--Table Follows--
<PAGE>
EXHIBIT 20
PAGE 4 OF 4
HOST MARRIOTT SERVICES CORPORATION
CONSOLIDATED OPERATING RESULTS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE TWELVE TWENTY-FOUR TWENTY-FOUR
WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED
6/18/99 6/19/98 (A) 6/18/99 6/19/98 (A)
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
<S> <C> <C> <C> <C>
OPERATING SUMMARY
REVENUES $ 350.0 $ 322.6 $ 658.9 $ 599.9
OPERATING COSTS AND EXPENSES (B) 329.7 304.1 636.1 579.4
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
OPERATING PROFIT 20.3 18.5 22.8 20.5
Interest expense (9.6) (9.2) (19.0) (18.4)
Interest income 0.2 0.6 0.4 1.3
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 10.9 9.9 4.2 3.4
Provision for income taxes 4.3 3.7 1.7 1.1
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 6.6 6.2 2.5 2.3
Cumulative effect of change in accounting for start-up
activities
(net of related income tax benefit of $0.5 million) --- --- (0.7) ---
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
NET INCOME $ 6.6 $ 6.2 $ 1.8 $ 2.3
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
INCOME PER COMMON SHARE
Basic:
Income before change in accounting principle $ 0.20 $ 0.18 $ 0.07 $ 0.07
Cumulative effect of change in accounting for start-up --- --- (0.02) ---
activities
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Net income $ 0.20 $ 0.18 $ 0.05 $ 0.07
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Diluted:
Income before change in accounting principle $ 0.19 $ 0.17 $ 0.07 $ 0.06
Cumulative effect of change in accounting for start-up --- --- (0.02) ---
activities
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Net income $ 0.19 $ 0.17 $ 0.05 $ 0.06
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Weighted Average Common Shares Outstanding
Basic 33.6 34.0 33.7 34.2
Diluted 34.7 35.7 34.7 35.9
EBITDA $ 35.6 $ 32.8 $ 52.9 $ 48.1
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
REVENUES BY BUSINESS LINE
Airports $ 263.6 $ 242.7 $ 509.9 $ 460.2
Travel Plazas 80.1 75.5 137.6 130.7
Shopping Malls 6.3 4.4 11.4 9.0
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Total revenues $ 350.0 $ 322.6 $ 658.9 $ 599.9
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
OPERATING PROFIT (LOSS) BY BUSINESS LINE (C)
Airports $ 26.9 $ 26.7 $ 47.1 $ 46.2
Travel Plazas 7.9 5.8 5.2 2.1
Shopping Malls (0.4) (0.5) (1.1) (0.7)
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
Total operating profit $ 34.4 $ 32.0 $ 51.2 $ 47.6
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
PERIOD END BALANCE SHEET DATA JUNE 18, 1999 June 19, 1998
---------------- ---------------
Cash and cash equivalents $ 33.9 $ 53.4
Total assets 590.9 537.6
Borrowings under line-of-credit agreement 27.7 ---
Long-term debt 406.0 406.0
- ---------------------------------------------------------------- ---------------- --------------- - ---------------- ---------------
<FN>
(A)Certain minor reclassifications were made to the prior year financial
statements to conform to the 1999 presentation.
(B)Operating costs and expenses include external Year 2000 costs of $0.8 million
in the second quarter of 1999, $0.2 million in the second quarter of 1998,
$1.8 million in the first two quarters of 1999, and $0.4 million in the first
two quarters of 1998.
(C)Before general and administrative expenses and cumulative effect of change in
accounting.
</FN>
</TABLE>
EXHIBIT 20.1
PAGE 1 OF 4
FOR IMMEDIATE RELEASE FOR MORE INFORMATION:
HOST MARRIOTT SERVICES:
MEDIA INQUIRIES:
WENDY WATKINS: 301-380-7903
INVESTOR RELATIONS:
SHARON WHITING: 301-380-7215
AUTOGRILL CONTACT:
LUCIANO LUFFARELLI:
011-39-02-4826-3224
011-39-0335-610-1003
[email protected]
-------------------------------
AUTOGRILL TO ACQUIRE HOST MARRIOTT SERVICES
COMBINATION WILL CREATE THE LEADING GLOBAL AIRPORT AND TOLLROAD CONCESSION
COMPANY AND ONE OF THE LEADING QUICK SERVICE RESTAURANT OPERATORS
BETHESDA, MARYLAND, JULY 26, 1999--The Board of Directors of
Autogrill (AGL.IM) today announced that it approved a definitive
agreement to acquire all of the outstanding common stock of Host
Marriott Services (NYSE: HMS). The acquisition will create the leading
global operator of commercial catering for travelers with operations in
North America, Europe, Australia and Asia and annual sales of over
US$2.6 billion/Euro 2.4 billion based on 1998 data. The combined
company will operate facilities in over 834 sites in five primary
business segments: airports (76), travel plazas (609), shopping malls
(66), railway stations (21) and quick service restaurants (46). In
addition the group will operate (16) facilities in other segments.
The transaction has been unanimously approved by the Board of
Directors of Host Marriott Services which will recommend the
transaction to its shareholders. It remains subject to receipt of
customary regulatory approvals.
-more-
<PAGE>
EXHIBIT 20.1
PAGE 2 OF 4
ADD 1
AUTOGRILL TO ACQUIRE HOST MARRIOTT SERVICES
In 1998 Host Marriott Services had sales of $1,378 million (Euro 1,312
million)and EBITDA of $126 million (Euro 120 million). In the two quarters
ending June 18, 1999 the company had sales of $659 million (vs. $600 million
for the previous year) and EBITDA of $53 million (vs. $48 million for the
previous year). As of June 18, 1999 Host Marriott Services had net indebtedness
of $400 million (Euro 381 million).
Under the terms of the agreement, Host Marriott Services stockholders
will receive $15.75 per share in cash from Autogrill in a tender offer expected
to commence on August 2, 1999. The tender will remain open for a period of 20
business days and is subject to acceptance by at least two-thirds of Host
Marriott Services shareholders. The company has 33.6 million shares outstanding.
The acquisition will be financed with proceeds from a recent
convertible bond issuance and lines of credit.
Gilberto Benetton, Chairman of Autogrill and Edizione Holding, majority
owner of Autogrill said,"The company will be the largest operator of concessions
in airports and tollroads worldwide and one of the largest food service
providers in the world. The acquisition is an important strategic step in
positioning the company for success in a business that is becoming increasingly
global. Edizione Holding shares the vision of Autogrill and intends to remain an
active and supportive shareholder."
Paolo Prota Giurleo, Chief Executive Officer of Autogrill, commented,
"We have admired Host Marriott Services operations in the US and internationally
for a number of
-more-
<PAGE>
EXHIBIT 20.1
PAGE 3 OF 4
ADD 2
AUTOGRILL TO ACQUIRE HOST MARRIOTT SERVICES
years. The combination of Autogrill and Host Marriott Services will create a new
company that will offer clients and investors a unique combination of
distinctive brands, management expertise and strong potential for future growth.
This transaction provides an important opportunity to realize a wide range of
synergies and create value for our shareholders. We have great faith in existing
management and Host Marriott Services employees and will encourage their
continued contribution going forward as we strive to create exciting growth
opportunities for the combined company."
According to Host Marriott Services President and Chief Executive
Officer, Bill McCarten, "This offer is a reflection of the unique and powerful
business we have built over the years and a recognition of our innovative market
leadership in North America and our successful growth strategies. Together with
Autogrill we will continue to provide outstanding client and customer service."
Autogrill, based in Milan, Italy, is a long-established corporation,
listed on the Milan Stock Exchange and majority-owned by the Benetton family.
With annual revenues of approximately $1.2 billion and over 12,000 employees,
Autogrill is the leading catering group for travelers and the second largest
commercial catering group in Europe with 636 restaurants and bars in nine
European countries. Key food service concepts include Autogrill, the brand for
motorway restaurants; Spizzico, a quick service
-more-
<PAGE>
EXHIBIT 20.1
PAGE 4 OF 4
ADD 3
AUTOGRILL TO ACQUIRE HOST MARRIOTT SERVICES
pizza chain; Ciao, a self-service restaurant chain; as well as international
brands such as Burger King, which has granted the company an exclusive agreement
for use of the Burger King franchise in Italy.
Host Marriott Services Corporation, headquartered in Bethesda, Maryland
and listed on the New York Stock Exchange, was previously a subsidiary of Host
Marriott Corporation prior to its spin-off in 1995. Host Marriott Services, with
revenues of $1.4 billion (Euro 1.3 billion), is the leading provider of food,
beverage and retail concessions at nearly 200 travel and entertainment venues,
with approximately 26,000 employees in seven countries around the globe. The
company operates in 18 of the 20 largest airports in the US such as JFK in New
York, Boston, Washington DC, Miami, San Francisco and Los Angeles. Host Marriott
Services is best known for its unique business approach that combines
internationally known brands including Burger King, Pizza Hut, Starbucks,
Sbarro, Tie Rack and Bath and Body Works located in airports, travel plazas,
shopping malls and entertainment attractions.
Host Marriott Services was advised by Deutsche Bank Alex. Brown.
Goldman Sachs and Boston Consulting Group acted as advisors to Autogrill.
###
Note: A copy of this release is available on Host Marriott Services website at
WWW.HMSCORP.COM and on Autogrill's website at WWW.AUTOGRILL.COM.
